The World Wide Web (“the Web”) is an interactive computer environment. The Web uses a collection of common protocols, including the Hypertext Transfer Protocol (“HTTP”), and file formats, including Hypertext Markup Language (“HTML”), to enable users to obtain information from or exchange information with a huge number of organizations, via the Internet, from virtually anywhere in the world. In order to establish a presence on the Web, organizations generally construct a “Web site.” Such a Web site generally includes a collection of documents relating to the organization that is accessible by users using an address on the Web, called a Universal Resource Locator (“URL”), publicized by the organization.
The Web is increasingly used as a channel for commercial activity. Many organizations have achieved great success at selling products and services through their Web sites. For instance, a significant fraction of the airline tickets, music compact discs, and books sold today are sold via the Web.
In order to attract customers for such sales, a merchant must generally advertise its Web site on the Web or another more traditional media, or otherwise pay to attract customers. In most such sales, the purchase price is paid using a credit card or check card. In order to complete such a purchase, the customer provides to the merchant information associated with the credit card or check card, such as the number and expiration date of the credit card or check card. The customer commonly also provides additional information about himself or herself, such as name and postal address for delivering physical goods.
The merchant uses the provided credit card or debit card information to generate a request for payment of the purchase price, which it transmits to a payment processor. The payment processor in turn charges the purchase price to the customer's credit card or check card, and credits the merchant's account in the amount of the purchase price. For a particular customer, this process is generally repeated for each merchant from which the customer makes a purchase. Similarly, a merchant generally repeats this process for each purchase made by a customer.
The foregoing approach is efficient for purchases having a significant purchase price, such as those above US$ 20. However, because a significant portion of the actual costs of processing a credit card or check card transaction are fixed and not related to the amount of the transaction, processing credit card transactions for lower amounts is generally cost-prohibitive. As a result, credit card and check card transactions are generally not used to purchase goods and services having a relatively low price, such as those below US$ 20. Additionally, the high cost of providing customer service on the Internet, including such recurring operations as supplying lost passwords, raises the cost for selling goods, thus raising the minimum price at which goods must be sold to realize a profit.
While other forms of payment, such as cash proxies, have been proposed for use in such lower-priced transactions, these other forms of payment have failed to achieve acceptance on the Web. This is largely due to the amount of extra interaction that these cash proxy payment methods require from the customer, as customers are often unwilling to tolerate a great deal of inconvenience to purchase an inexpensive item. Moreover, even if such an alternative form of payment did achieve acceptance on the Web, they typically impose significant processing costs on those merchants that accept them, and do nothing to alleviate customer service costs.
Since credit card and check card transactions are the only forms of payment that have achieved general acceptance on the Web, it is generally not possible to buy such lower-priced goods and services on the Web. These lower-priced purchases are, however, important. In particular, digital goods, such as electronic magazine articles, music, or games, delivered via the Web have a very small marginal cost. While there may be a significant demand for some digital goods if priced at appropriately modest levels, when their price is set at or above the minimum viability threshold for credit card and check card transactions, demand is very low or nonexistent. Therefore, because goods cannot be sold via credit card or check card at a price below the minimum viability threshold, and there is little demand at or above the minimum viability threshold, such goods are incapable of generating significant revenue and generally are not offered for sale.
The transactional model discussed above, in which customers make purchases directly from merchants using credit card or check card transactions, have serious disadvantages for both customers and merchants. First, as noted above, low-priced purchases are generally impossible to conduct using this model, which generally precludes customers from purchasing and merchants from selling certain products, and limits the number of customers that can purchase others. Further, the model requires each customer to expend significant effort managing his or her relationship with each merchant, and also requires each merchant to make significant up-front and continuing investments in managing its relationship with its customers and with its payment processor.
FIG. 1 is a relationship diagram showing the relationships arising between customers, merchants, and payment processors in accordance with the conventional transaction model. The diagram shows a number of customers 110, who engage in purchase transactions with a number of merchants 120. Each line between a customer 110 and a merchant 120 represents a relationship between the customer and the merchant that must be managed by both the customer and the merchant.
From the customer's perspective, he or she must provide credit card or check card payment information to each new merchant from which the customer makes a purchase. To do so is generally both inconvenient, because the customer must enter the same information over and over, and disconcerting, because the customer is required to entrust this sensitive information to several different parties, one or more of which may be untrustworthy. In addition, customers must learn the customer service policies of every merchant from which they purchase, which can be a burdensome process, especially for modestly-priced purchases.
From the merchant's perspective, it must build, operate, and scale up an infrastructure for accepting credit or check card payments from customers, for delivering purchased goods, and for providing customer service to those customers. Such infrastructures are generally expensive, and often distract merchants from their more fundamental role of creating and selling products.
Further disadvantages arise in the conventional model when a merchant subjects customers to user authentication. Merchants often use user authentication, the process of establishing that a Web user is actually a returning customer, to enable customers to make subsequent purchases using the payment information from a previous purchase, or to facilitate continuing consumption of purchased goods, such as continued access to an online periodical to which the customer has purchased a subscription. Generally, in order to authenticate as a returning customer, a user must enter a user name and password that is specific to each merchant. From the customer's perspective, submitting to user authentication involves the disadvantages of having to use a user name that is unique among those of each merchant's customers and thus is not always freely chosen by the customer, having to remember or record each of these different member names, and having to re-authenticate each time the customers move from the Web site of one merchant to the Web site of another, which can prove burdensome and frustrating for users.
From the merchant's perspective, performing user authentication involves the disadvantages of having to build, operate, and scale up a mechanism for performing user authentication and a customer database to support user authentication, an effort that is potentially both costly and distracting. In addition to relationships with its customers, in the conventional model a merchant must also maintain a relationship with a payment processor 130 to process credit or check card transactions. Maintaining a relationship with a payment processor requires the merchant to shop for and negotiate a contract with a payment processor, and to build, operate, and scale up a mechanism for communicating with the payment processor, another effort that is potentially both costly and distracting.
It can be seen from the foregoing that, from the perspective of merchants, a reliable system for selling goods, including lower-priced goods on the Web, without having to develop an infrastructure for accepting payment, for registering and authenticating customers would have significant utility, or for providing customer support. It can further be seen that, from the perspective of customers, a convenient system that facilitates the purchase of goods, including lower-priced goods from a number of different merchants without having to submit payment information to each merchant or reauthenticate to each merchant, and which provides centralized customer service for purchases made from multiple merchants would also have significant utility.